Two‐period supply chain coordination strategies with ambidextrous sustainable innovations

Abstract This study considers a manufacturer with ambidextrous sustainable innovation capability selling products in environmentally conscious market through an independent retailer in a two‐period game setting. We design a two‐period game theoretic and dyadic supply chain (SC) model considering exploitative and exploratory nature of environmental innovations. We study five different contract types, namely, wholesale price contract, vertical Nash game structure, cost sharing contract, revenue sharing contract and two‐part tariff contract. We demonstrate the impact of market sensitivity towards sustainable innovation and cost parameters on optimal level of decision parameters. The equilibrium results reveal that a suitably designed two‐part tariff contract can be used to achieve coordination in a fragmented SC. The equilibrium results assist managers to optimise the SC based on the two‐period contract model. The results obtained in this study can help the decision‐makers to take decisions on investment in the ambidextrous sustainable innovation under different types of contract structures.